COVID-19 Pandemic Could Contribute to Record Catastrophe Losses

RECORD BREAKING in red letters in a red rectangle

June 30, 2020

RECORD BREAKING in red letters in a red rectangle

Guy Carpenter said the COVID-19 pandemic looks to rank among the insurance and reinsurance sector's most expensive events, contributing to total 2020 catastrophe losses ranging from $100 billion up to $160 billion.

While noting that uncertainty remains over the ultimate insurance and reinsurance losses resulting from the COVID-19 pandemic, Guy Carpenter noted that the COVID-19 pandemic also has the potential to be one of the slowest developing catastrophes insurers and reinsurers have experienced, likely creating a prolonged period of uncertainty.

"Combined with insured catastrophe losses that have already occurred year-to-date, along with additional catastrophe claims that are typical in the second half of the year, losses for fiscal year 2020 look set, at a minimum, to approach $100 billion for only the fourth time ever," a Guy Carpenter statement said.

"Should claims from COVID-19 settle at the higher end of current market estimates or losses aggregate elsewhere from the ongoing unrest in the United States or an active wind season, 2020 could go down as the most expensive loss year ever and test further the limits of some carriers' capital resilience," the statement said.

Guy Carpenter noted that there are some factors offsetting the COVID-19 losses. Lines of insurance such as personal and commercial auto have benefited from a dip in claims frequency due to shutdowns and stay-at-home orders issued to slow the spread of COVID-19. In addition, the reinsurance industry's fundamentals remain strong, with the sector's capital base proving resilient to recent financial market volatility.

Opportunities remain for strongly capitalized companies to offer new solutions and grow selectively into challenged lines, Guy Carpenter said.

June 30, 2020